7 Steps of the Decision Making Process

You Often Make Poor Comparisons
How do you know that you got a good deal on that digital tablet you just bought? Or how do you know that the price you paid for a gallon of milk at the grocery store was fair? The comparison is one of the major tools we use when making decisions. You know what the typical price of a tablet or gallon of milk is, so you compare the deals to find in order to select the best possible price. We assign value based on how items compare to other things.
But what happens when you make poor comparisons? Or when the items you are comparing your options to are not representative or equal? Consider this for example: how far out of your way would you go to save $25?
If I told you that you could save $25 on a $75 item by driving 15 minutes out of your way, you would probably do it. But if I told you that you could save $25 off of a $10,000 item, would you still be willing to go out of your way to save the money? In most cases, people are less willing to travel further to save money on the more expensive item. Why? Twenty-five dollars is still worth the same amount in either case.
In such instances, you've just fallen victim to a faulty comparison. Since you are comparing the amount you save to the amount you pay, $25 seems like a much greater savings when it is compared against a $75 item than it does when contrasted with a $10,000 item.
When making decisions, we often make rapid comparisons without really thinking about our options.
In order to avoid bad decisions, relying on logic and thoughtful examination of the options can sometimes be more important than relying on your immediate "gut reaction."
You Can Be Too Optimistic
Surprisingly, people tend to have a natural-born optimism that can hamper good decision-making. In one fascinating study, researcher Tali Sharot asked participants what they thought the chances were of a number of unpleasant events happening—things such as being robbed or getting a terminal illness.3 After the subjects had given their predictions, the researchers then told them what the actual probabilities were.
When people are told that the risk of something bad happening is lower than they expected, they tend to then adjust their predictions to match the new information they learned. When they discover that the risk of something bad happening is actually much higher than they estimated, they tend to simply ignore the new information. For example, if a person predicts that the odds of dying from smoking cigarettes is only 5% but is then told that the real risk of dying is actually closer to 25%, people will likely ignore the new information and stick with their initial estimate.
Part of this overly optimistic outlook stems from our natural tendency to believe that bad things happen to other people, but not to us. When we hear about something tragic or unpleasant happening to another person, we often tend to look for things that the person might have done to cause the problem. This tendency to blame the victims protects us from having to admit that we are just as susceptible to tragedy as anyone else.
Sharot refers to this as the optimism bias, or our tendency to overestimate the likelihood of experiencing good events while underestimating the likelihood of experiencing bad events.3 She suggests that this isn't necessarily a matter of believing that things will just magically fall into place, but instead overconfidence in our own abilities to make good things happen.
So what impact does this optimism bias have on the decisions we make? Because we might be overly optimistic about our own abilities and prospects, we are more likely to believe that our decisions are the best ones.
Experts might warn that smoking, being sedentary, or eating too much sugar can kill, but our optimism bias leads us to believe that it mostly kills other people, not us.